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Is SPDR S&P Aerospace & Defense ETF (XAR) a Strong ETF Right Now?
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The SPDR S&P Aerospace & Defense ETF (XAR - Free Report) was launched on 09/28/2011, and is a smart beta exchange traded fund designed to offer broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. XAR has been able to amass assets over $1.53 billion, making it one of the larger ETFs in the Industrials ETFs. This particular fund seeks to match the performance of the S&P Aerospace & Defense Select Industry Index before fees and expenses.
The S&P Aerospace & Defense Select Industry Index represents the aerospace & defense sub-industry portion of the S&P Total Stock Market Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Global Select Market. The Aerospace & Defense Index is a modified equal weight index.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.35% for XAR, making it one of the least expensive products in the space.
XAR's 12-month trailing dividend yield is 0.48%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
XAR's heaviest allocation is in the Industrials sector, which is about 100% of the portfolio.
When you look at individual holdings, Transdigm Group Inc (TDG - Free Report) accounts for about 4.40% of the fund's total assets, followed by Curtiss Wright Corp (CW - Free Report) and Howmet Aerospace Inc (HWM - Free Report) .
Its top 10 holdings account for approximately 42.58% of XAR's total assets under management.
Performance and Risk
So far this year, XAR has gained about 8.69%, and was up about 5.55% in the last one year (as of 08/21/2023). During this past 52-week period, the fund has traded between $91.68 and $125.09.
The fund has a beta of 1.08 and standard deviation of 24.04% for the trailing three-year period, which makes XAR a medium risk choice in this particular space. With about 34 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Aerospace & Defense ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Invesco Aerospace & Defense ETF (PPA - Free Report) tracks SPADE Defense Index and the iShares U.S. Aerospace & Defense ETF (ITA - Free Report) tracks Dow Jones U.S. Select Aerospace & Defense Index. Invesco Aerospace & Defense ETF has $1.96 billion in assets, iShares U.S. Aerospace & Defense ETF has $5.54 billion. PPA has an expense ratio of 0.58% and ITA charges 0.39%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Is SPDR S&P Aerospace & Defense ETF (XAR) a Strong ETF Right Now?
The SPDR S&P Aerospace & Defense ETF (XAR - Free Report) was launched on 09/28/2011, and is a smart beta exchange traded fund designed to offer broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. XAR has been able to amass assets over $1.53 billion, making it one of the larger ETFs in the Industrials ETFs. This particular fund seeks to match the performance of the S&P Aerospace & Defense Select Industry Index before fees and expenses.
The S&P Aerospace & Defense Select Industry Index represents the aerospace & defense sub-industry portion of the S&P Total Stock Market Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Global Select Market. The Aerospace & Defense Index is a modified equal weight index.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.35% for XAR, making it one of the least expensive products in the space.
XAR's 12-month trailing dividend yield is 0.48%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
XAR's heaviest allocation is in the Industrials sector, which is about 100% of the portfolio.
When you look at individual holdings, Transdigm Group Inc (TDG - Free Report) accounts for about 4.40% of the fund's total assets, followed by Curtiss Wright Corp (CW - Free Report) and Howmet Aerospace Inc (HWM - Free Report) .
Its top 10 holdings account for approximately 42.58% of XAR's total assets under management.
Performance and Risk
So far this year, XAR has gained about 8.69%, and was up about 5.55% in the last one year (as of 08/21/2023). During this past 52-week period, the fund has traded between $91.68 and $125.09.
The fund has a beta of 1.08 and standard deviation of 24.04% for the trailing three-year period, which makes XAR a medium risk choice in this particular space. With about 34 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Aerospace & Defense ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Invesco Aerospace & Defense ETF (PPA - Free Report) tracks SPADE Defense Index and the iShares U.S. Aerospace & Defense ETF (ITA - Free Report) tracks Dow Jones U.S. Select Aerospace & Defense Index. Invesco Aerospace & Defense ETF has $1.96 billion in assets, iShares U.S. Aerospace & Defense ETF has $5.54 billion. PPA has an expense ratio of 0.58% and ITA charges 0.39%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.